Mr. Armughan Ali Assistant Professor Department of Computer Science CIIT Attock. CSC373: Management Information Systems

Technology is no longer an afterthought in business strategy, but the cause and driver IT can change the way businesses compete A strategic information system is any information system (TPS, MIS or DSS) that uses IT to help an organization… Gain a competitive advantage Reduce a competitive disadvantage Or meet other strategic enterprise objectives Strategic IT 2-2

Competitive Forces & Strategies How should a business professional think about competitive strategies? How can a business use information systems to apply competitive strategies ?

Competitive Forces & Strategies A company can survive and succeed in the long run only if it successfully develops strategies to confront five competitive forces that shape the structure of competition in its industry. ANSWER

Competitive Forces & Strategies

Cost Leadership Become low-cost producers Help suppliers or customers reduce costs Increase cost to competitors Differentiation Strategy Differentiate a firm’s products from its competitors’ Focus on a particular segment or niche of market Five Competitive Strategies 2-6

Innovation Strategy Unique products, services, or markets Radical changes to business processes Growth Strategy Expand company’s capacity to produce Expand into global markets Diversify into new products or services Competitive Strategies (continued) 2-7

Alliance Strategy Establish linkages and alliances with customers, suppliers, competitors, consultants, and other companies Includes mergers, acquisitions, joint ventures, virtual companies Competitive Strategies (continued) 2-8

These strategies are not mutually exclusive Organizations use one, some, or all A given activity could fall into one or more categories of competitive strategy Not everything innovative serves to differentiate one organization from another Likewise, not everything that differentiates organizations is necessarily innovative Using Competitive Strategies 2-9

Lock in Customers and Suppliers Deter them from switching to competitors Build in Switching Costs Make customers and suppliers dependent on the use of innovative IS Erect Barriers to Entry Discourage or delay other companies from entering the market Increase the technology or investment needed to enter Other Competitive Strategies 2-10

Build Strategic IT Capabilities Take advantage of strategic opportunities when they arise Improve efficiency of business practices Leverage Investment in IT Develop products and service that would not be possible without a strong IT capability Other Competitive Strategies 2-11

Customer-Focused Business The driving force behind world economic growth has changed from manufacturing volume to improving customer value. As a result, the key success factor for many firms is maximizing customer value.

What is the business value in being customer-focused? Ability of Business to be Keep customers loyal Anticipate their future needs Respond to customer concerns Provide top-quality customer service How to Focus on customer value Quality, not price, has become the primary determinant of value Customer-Focused Business 2-13

Companies that consistently offer the best value from the customer’s perspective are successful Because they Track individual preferences Keep up with market trends Supply products, services, and information anytime, anywhere Tailor customer services to the individual Use Customer Relationship Management (CRM) systems to focus on the customer Internet, Intranet and Extranet plays a pivotal role Iin communication among entities (customer, supplier, service provider etc) Providing Customer Value 2-14

Building Customer Value via the Internet 2-15

View the firm as a chain of basic activities that add value to its products and services Primary processes directly relate to manufacturing or delivering products Support processes help support the day-to-day running of the firm and indirectly contribute to products or services Use the value chain to highlight where competitive strategies will add the most value The Value Chain and Strategic IS 2-16

Using IS in the Value Chain 2-17

A company that emphasizes strategic business use of IT would use it to gain a competitive differentiation Products Services Capabilities Strategic Uses of IT 2-18

Called BPR or simply Reengineering Fundamental rethinking and radical redesign of business processes Seeks to achieve improvements in cost, quality, speed, and service Potential payback is high, but so is risk of disruption and failure Use of ERP across Functional Units might be useful for one could be destructive for other. Organizational redesign approaches are an important enabler of reengineering Includes use of IT, process teams, case managers Reengineering Business Processes 2-19

IT plays a major role in reengineering most business processes Can substantially increase process efficiencies Improves communication Facilitates collaboration The Role of Information Technology 2-20

Many processes are reengineered with… Enterprise resource planning software Web-enabled electronic business and commerce systems A Cross-Functional Process 2-21

IT that supports this process… CRM systems using intranets and the Internet Supplier-managed inventory systems using the Internet and extranets Cross-functional ERP software to integrate manufacturing, distribution, finance, and human resource processes Customer-accessible e-commerce websites for order entry, status checking, payment, and service Customer, product, and order status databases accessed via intranets and extranets Reengineering Order Management 2-22

Agility is the ability to prosper In rapidly changing, continually fragmenting global markets By selling high-quality, high-performance, customer- configured products and services By using Internet technologies An agile company profits in spite of Broad product ranges Short model lifetimes Individualized products Arbitrary lot sizes Becoming an Agile Company 2-23

An agile company… Presents products as solutions to customers’ problems Cooperates with customers, suppliers and competitors Brings products to market as quickly and cost-effectively as possible Leverages the impact of its people and the knowledge they possess Strategies for Agility 2-24

How IT Helps a Company be Agile 2-25

A virtual company uses IT to link… People Organizations Assets Ideas Inter-enterprise information systems link… Customers Suppliers Subcontractors Competitors Creating a Virtual Company 2-26

Basic business strategies Share information and risk with alliance partners Link complimentary core competencies Reduce concept-to-cash time through sharing Increase facilities and market coverage Gain access to new markets and share market or customer loyalty Migrate from selling products to selling solutions Virtual Company Strategies 2-27

A knowledge-creating company or learning organization… Consistently creates new business knowledge Disseminates it throughout the company Builds it into its products and services Building a Knowledge-Creating Company 2-28

Explicit Knowledge Data, documents, and things written down or stored in computers Tacit Knowledge The “how-to” knowledge in workers’ minds Represents some of the most important information within an organization A knowledge-creating company makes such tacit knowledge available to others Two Kinds of Knowledge 2-29

Successful knowledge management Creates techniques, technologies, systems, and rewards for getting employees to share what they know Makes better use of accumulated workplace and enterprise knowledge Knowledge Management 2-30

Knowledge Management Techniques 2-31

Knowledge management systems A major strategic use of IT Manages organizational learning and know-how Helps knowledge workers create, organize, and make available important knowledge Makes this knowledge available wherever and whenever it is needed Knowledge includes Processes, procedures, patents, reference works, formulas, best practices, forecasts, and fixes Knowledge Management Systems (KMS) 2-32

Case 3: GE, Dell, Intel, GM, and Others Does IT matter? No: Nicholas Carr argues that IT is infrastructure like electricity Too commonplace to get competitive advantage Yes: IT is not just networks and computers The important part is the software and information and how IT is used For Wal-Mart, GE, Dell, and many other companies, IT is a huge advantage and will continue to be. 2-33

Case Study Questions 1. Do you agree with the argument made by Nicholas Carr to support his position that IT no longer gives companies a competitive advantage? Why or why not? 2. Do you agree with the argument made by the business leaders in this case in support of the competitive advantage that IT can provide to a business? Why or why not? 3. What are several ways that IT could provide a competitive advantage to a business? Use some of the companies mentioned in this case as examples. Visit their Web sites to gather more information to help you answer. 2-34

Case 4: GE Energy and GE Healthcare Networking and data storage & analysis technologies enable companies like GE to gain a competitive advantage by providing unique products and services to their customers. This strategic investment in IT has a dramatic effect on the profitability of GE’s services. The strategic business partnership results in a longer- term relationship than traditional methods. 2-35

Case Study Questions 1. What are the business benefits of using information technology to build strategic customer relationships for GE Energy and GE Healthcare? What are the business benefits for their customers? 2. What strategic uses of information technology discussed in this chapter and summarized in Figures 2.3 and 2.5 do you see implemented in this case? Explain the reasons for your choices. 2-36

Case Study Questions 3. How could other companies benefit from the use of IT to build strategic customer relationships? Provide or propose several examples of such uses. Explain how each benefits the business and its customers. 2-37